With the Fed poised to cut rates, keep an eye on your APY

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The Federal Reserve has signaled openness to cutting rates for the first time in a decade, possibly at its July 30-31 meeting. Recently, Ally Bank and Marcus by Goldman Sachs got ahead of the possible rate cut by decreasing their savings account annual percentage yields (APYs) by 10 basis points.

Both banks emailed their customers about the 0.1 percent APY decreases, but it’s possible to miss notifications in your overstuffed inbox. That’s why checking your statement or online account is so important, especially in an age when many consumers no longer get paper statements in the mail. Monitoring your statement can also help you detect fraudulent activity or a bank error.

If you haven’t checked your statement lately, you might be surprised to find out that you’re earning a low yield compared with the other available options.

Only 7 percent of people in a May Bankrate survey reported earning between 1.51 percent APY and 2 percent APY. And 14 percent responded that they were earning more than 2 percent APY. Even with a rate decrease, savings and money market yields above 2 percent are still likely to remain available.

“It’s a good idea just to check it and make sure that there’s nothing surprising on the statement,” says Lauren Zangardi Haynes, CIMA, a certified financial planner at Spark Financial Advisors. “And there shouldn’t really be anything on the statement anyways except for how much interest you earned or maybe a couple of deposits. So it shouldn’t take too long.”

Generally, savings APYs are variable. This means a bank can usually change these at any time. An exception to this is if you have an introductory or promotional rate. These may be fixed for a set period, as long as you comply with the rules to keep this rate.

The importance of being aware of your finances

When clients first come to see Zangardi Haynes, it’s pretty common for them not to know their yield on their savings account. “Or they might make a joke like, ‘Well, I’m sure it’s really low. I’m getting paid next to nothing,’” Zangardi Haynes says.

Anna Sergunina, a certified financial planner at MainStreet Financial Planning, Inc., in Burlingame, California, checks her accounts monthly on what she calls her money date. A simple reminder on your phone can serve as a reminder or you can check when you pay your monthly bills.

“I think once a month is reasonable enough to ask,” Sergunina says. “Because if you let it go for more than that, there’s more opportunities for things to happen.”

Look online for top APYs

A slight decline in APY doesn’t necessarily mean you should switch banks. But you should know what yields are available.

If you do switch for a better rate, keep in mind that some savings accounts and money market accounts have early close-out fees, usually within the first six months. Check with your bank to see if your account or the one you plan to move to charges this fee.

With savings and money market account yields potentially declining because they generally have variable rates, locking in your APY with a CD may be a strategy to consider for money you don’t plan on using soon.

Even with a rate decrease, online banks are more likely to offer competitive yields than brick-and-mortar banks. If you’ve never tried an online bank, compare some and see if there’s one you like. Even with the potential of decreasing rates, this could be a great opportunity to earn a much higher yield than you’re currently getting, especially if you’re close to the national savings account average of 0.1 percent APY.

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Written by
Matthew Goldberg
Consumer banking reporter
Matthew Goldberg is a consumer banking reporter at Bankrate. Matthew has been in financial services for more than a decade, in banking and insurance.
Edited by
Senior mortgage editor